I am 45 years married with a son and residing in Bidar. I had availed a home loan of INR 35 Lakhs 4 years ago from a reputed bank to buy a house in my hometown where I reside. I enjoyed tax benefits on this home loan. I now plan to sell this apartment and invest the money in a business as I have no further need of it and pay back the home loan. A friend has told me I will lose the tax benefit I previously enjoyed. Is this true?
Your Home Loan EMI consists of Principal and Interest component. The principal component is allowed as a deduction under Section 80C, up to INR 1.5 Lakhs a year. However, if you sell your residential house/apartment within five years, you may have to forgo your tax benefits. The entire amount of deduction claimed under Section 80C in prior years on the amount of the principal repayment will be added to the taxable income in the year of sale of the property. Also, no income tax deductions shall be allowed in respect of repayments made during the year of sale of the property. Please note the following: 1. This rollback is applicable only to deduction claimed under Section 80C. 2. Deductions claimed under Section 24 (b) up to INR 2 Lakhs a year on interest payable on your home loan will not be withdrawn.